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Board of Trustees of Health and Welfare Department of Construction and General Laborers' District Council of Chicago and Vicinity v. Allison Enterprises, Inc.

United States District Court, N.D. Illinois, Eastern Division

August 27, 2014



CHARLES P. KOCORAS, District Judge.

This matter comes before the Court on the motion for summary judgment of Plaintiff Board of Trustees of the Health and Welfare Department of the Construction and General Laborers' District Council of Chicago and Vicinity (the "Fund") pursuant to Federal Rule of Civil Procedure 56 ("Rule 56") against Defendants Allison Enterprises, Inc. d/b/a Mid America Vision ("MAV"), Mid America Benefit Services, Inc. ("MABS") (collectively "Mid America")[1] and Lawrence Silver ("Silver") ("Defendants"). Also before the Court is Silver's motion to strike portions of the Fund's Statement of Facts. For the following reasons, the Court grants summary judgment in favor of the Fund and denies Silver's motion to strike.


I. Facts

The following facts are taken from the parties' respective statements and exhibits filed pursuant to Northern District of Illinois Local Rule 56.1. Mid America is not represented by counsel and failed to file: (i) a response to the Fund's Rule 56.1(a)(3) statement as required by Rule 56.1(b)(3)(B); (ii) a Rule 56.1(b)(3)(C) statement of additional facts; or (iii) a response to the motion for summary judgment. The Fund's factual allegations as to Mid America are therefore deemed admitted to the extent they are supported by the record. See N.D.Ill. L.R. 56. 1(b)(3)(C) ("All material facts set forth in the statement required of the moving party will be deemed to be admitted unless controverted by the statement of the opposing party."); see also Smith v. Lamz, 321 F.3d 680, 682-83 (7th Cir. 2003).

As a threshold matter, this Court must first address the sufficiency of the Fund's Rule 56.1 Statement of Facts. Silver argues that the Fund's Statement of Facts are not in compliance with the applicable local rules, in that the Fund's responses contain numerous hearsay statements, improperly authenticated exhibits, legal conclusions, impermissible citations to deemed admissions of Mid America, and citations to pleadings from separate litigation. This Court has considered Silver's motion to strike. We review each Local Rule 56.1 statement and disregard any argument, conclusion, or assertion unsupported by the evidence in the record. The Court is mindful of its duty to weigh the credibility of the evidence presented by both parties and only relies on relevant, admissible evidence when ruling on the motion for summary judgment.

Silver makes specific arguments for Mid America throughout his papers. However, his attorneys do not represent Mid America. Mid America never formally responded to the motion for summary judgment. To the extent that the record supports the facts against Mid America, the Court admits them as true. Silver's main concern is that these facts may implicate him because he worked as the sole shareholder and president of the corporations. The Court takes this into consideration when ruling on this motion. See Allen v. Destiny's Child, 06 C 6606, 2009 WL 2178676, at *2 (N.D. Ill. July 21, 2009) (citing Fed.R.Civ.P. 36(b) when stating "... a plaintiff cannot use one defendant's deemed admissions as evidence against a codefendant.").

The parties do not dispute the facts below unless otherwise noted.

A. The Parties, the Agreement, and Procedures

The Fund is an employee benefit plan ("Plan"). MAV and MABS are Illinois corporations. Silver is the president and sole shareholder of MAV and MABS. Beginning on July 1, 1997, the Fund entered into a Vision Services Discount Fee Agreement (the "Agreement") with Defendants. Attached to the Fund's first amended complaint is a copy of the Agreement that is not signed or dated. Since it lacks proper execution by the parties, Silver disputes the Agreement's validity and argues that the Fund and Defendants did not operate under its terms.

Under the Agreement, the Fund's Plan participants and beneficiaries would take advantage of Mid America's network, or in other words, pre-negotiated schedules of benefits with participating vision care providers ("Providers"). The Agreement states "Mid America will not charge the Fund any fee, other than set forth in paragraph 1a." Paragraph 1a states that "Mid America... shall charge to the Fund the fees set on Exhibit A, items 1 through 4 for the provision of the stated services and items to Fund participants and beneficiaries." Exhibit A was not provided to the Court by either party.

With or without an executed Agreement, Silver and the Fund agree that their roles consisted of the following: The Fund processed claims of its Plan participants and beneficiaries through adjusters and had final authority to approve or reject claims. The Fund decided whether to pay an approved claim to Mid America for disbursement to a Provider and instructed Mid America which Providers to pay. The Fund also reviewed claims issues related to subrogation and coordination of benefits. The Fund created Explanation of Benefits ("EOB") forms that reflected whether a claim would be paid. The Fund provided these EOB forms with every lump sum check submitted to Mid America so that it knew how much to pay from that check to each Provider for each claim. Mid America did not issue EOB forms.

As for Mid America, it received periodic payments from Providers to participate in its network of vision care providers. The Fund tendered checks to Mid America made payable to "Mid America Vision, " which were subsequently endorsed by MAV as "deposit only" and deposited into the bank accounts of both MAV and MABS. These checks were to be disbursed to the Providers and the Fund gave Mid America instructions as to how to distribute the money. Silver's name was listed as an addressee on the primary bank account.

Mid America was additionally responsible for resolving claim disputes if there was a discrepancy between services rendered and services actually charged on claim forms submitted to the Fund. Further, if the Fund was unable to pay a Provider claim submitted through Mid America due to an issue with the claim, such as eligibility or lack of an accompanying explanation of benefits, the Fund would send the claim back to Mid America for the claim issue to be corrected by Mid America with the Providers.

B. Provider Agreement

In the many Mid America Vision Optometrist Provider Agreements ("Provider Agreement"), signed by Silver and various Providers, it states "Mid America has, and will continue to, enter into arrangements with group subscribers and individuals in which employees and individuals (and their dependents) will be eligible to receive eye examinations, optical hardware and products... based on a fee schedule or a negotiated schedule of benefits..." Also, the Provider Agreement states that Mid America would monitor Providers' performance, and follow up on and work with Providers to eliminate complaints. Providers paid Mid America money each month in turn for Mid America's services.

C. Role of Silver

Besides Silver, the only other individuals identified as employees of Mid America were Patricia Tracy ("Tracy"), who acted as the vice president and Caroline Cassidy ("Cassidy"), who worked as an employee. However, Tracy and Cassidy were paid through Sync Capital, a company owned by Silver, which also provided payroll services to Mid America.

According to Tracy's declaration, she discloses that she performed the day-to-day operations for Mid America such as entering claims, logging claims, depositing checks, printing checks, logging and paying expenses, and logging EOB forms. Tracy also states that Silver determined which Providers got paid, or did not get paid, pursuant to the EOB forms, but he did not make any determinations concerning eligibility, coverage or resolve disputes over claim forms. Tracy submits that Silver did not deposit the checks from the Fund, but some checks in evidence are signed by Silver. Tracy also asserts that MABS's rent was paid through Sync Capital.

As for record keeping, Silver produced three one-page documents during discovery that he considers minutes from annual meetings of Mid America for each of the following dates: September 3, 2009, September 7, 2010 and August 31, 2011. He also provided the bylaws for both MABS and Allison Enterprises.

D. Financial Issues and Termination of the Arrangement

On September 19, 2011, Silver took a $45, 000 loan from MABS (the "September 19th Loan"). MABS's shareholder loans report produced by Silver states that the $45, 000 was a "loan to a shareholder." However, MABS's bank account summary lists the $45, 000 transaction as a "bill payment" to Tavernita Chicago LLC ("Tavernita"), a restaurant which Silver has a relationship with through his company, Sync Capital. A check dated September 19, 2011 made out to Tavernita is signed by Silver. Deposit slips from this bank account also show deposits made on behalf of Mercadito, another restaurant in which Silver is associated with through Sync Capital.

On or about October 6, 2011, the Fund sent a letter ("Termination Notice") to Mid America notifying it that the Fund "has decided to terminate its arrangement with Mid America Vision for vision benefit services, effective as of 12:00 a.m. on January 1, 2012." The Termination Notice stated that "[f]ollowing the effective day of termination of this Agreement, each party shall remain liable for any obligations or liabilities arising from activities carried on prior to the effective date of termination." After issuing the Termination Notice, Mid America continued to forward claims to the Fund, and accordingly, the Fund continued to tender checks for payment to MAV. The parties dispute the amount that the Fund paid to MAV between the date of the Termination Notice and December 31, 2012-Silver argues it is approximately $701, 318.53 and the Fund claims it is over $1, 000, 000.

On November 9, 2011, after the Fund notified MAV that it was terminating the arrangement, a cashier's check was issued to Silver from MAB's bank account for $65, 000 (the "November 9th Loan"). This transaction was listed as a loan to shareholder on MAV's shareholder loan report. Silver admits in his requests for admissions that he received "a loan of $65, 000 from MAV to Sync Capital." On that same day, Sync Capital received a deposit of $65, 000.

MABS provided balance sheets for each month in 2011, which indicated loans to shareholders. MABS's Ledger and 2011 Profit and Loss Statements show payments for rent, stationary, supplies, office expenses and utilities were made from MABS's bank account and numerous other businesses were also located in the same location as Mid America. MABS made the payments for various utilities and office needs directly from its bank account. The 2011 Profit and Loss Statement also shows that MABS paid $36, 676 for its lease, $150, 748 in payroll, and that approximately 97.5% of MABS's total income came from the Fund. It does not reflect income from Providers who paid a monthly fee to Mid America to be part of its network.

A MABS Ledger also shows the following payments were made from MAV's primary bank account: (i) $150, 094.91 to Sync Capital; (ii) $45, 000 to Tavernita (the September 19th Loan); $1, 520.43 to Mercadito Chicago; (iii) $8, 388.09 to Patricia Tracy; (iv) $13, 012.55 to American Life Insurance; (v) $2, 880 to Universal Refrigeration; and (vi) $30, 240 to Anthony Sauro ("Sauro"), totaling $251, 135.98. This amount exceeds the $179, 000 in 2011 income to MABS's primary bank account that did not come directly from the Fund to pay approved Provider claims. Silver disputes this and claims that the corporate defendants owed him $279, 202. On October 26, 2012, after receiving the Termination Notice and after this lawsuit was filed, Mid America paid $75, 000 to its former attorney in this case from MABS's primary bank account.

Allison Enterprises and MABS also had bank accounts at Northern Trust. The Northern Trust bank statements show that transfers were made from Allison Enterprises's bank account to unidentified checking accounts, totaling $70, 400. One of the unidentified checking accounts belongs to Sync Capital according to a deposit slip for a $65, 000 deposit made to Sync Capital on October 9, 2011. The Northern Trust bank statements from MABS's account show that transfers were made to unidentified checking accounts, totaling $2, 626.

E. Missing Assets

Providers contacted or attempted to contact Silver regarding Mid America's failure to pay approved claims on behalf of Plan participants and beneficiaries. The Fund and Silver dispute the amount of missing assets to Providers in payment for approved ...

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